The Economics of PC gaming

Direct vs. Retail

So which is better? Buying the game directly from the developers or getting it at the store?

The simple answer is: Whatever way is best for you is best for us.

Now for the more complicated answer (which still amounts to the same):

If you buy a game for $39.95 from us directly, we see all $39.95 minus a couple dollars in electronic processing.  If you buy the game from a retailer, then we'll see approximately half of what you paid for it.

But we need people to buy it at retail for the game to succeed. The reason for that is that most people don't want to download games.  They want the box. Or they want the manual. Or they don't want to download a gigabyte of stuff.  Or they just aren't comfortable buying on-line.  There's a lot of reasons for that. 

Moreover, there's an astonishing number of people who simply buy games while casually browsing the store. They literally buy a game based on its box or vaguely from word of mouth.  All the ads, all the websites, all the PR, ultimately don't really come into play as simple word of mouth, having a nice box, and being on a store shelf.  We don't have a precise percentage of how many games are bought in this way but I would be willing to bet it's well over 50% of sales are from this. 

To be at retail you have to be able to sell typically 4 units PER store, PER week.  At the end of the month, the store looks at the same, sees its sales, and decides whether to continue stocking it.  Some retailers based future stocking based on those sales.  So even though buying direct means that we get twice as much money per unit, it takes away a retail purchase that might make the difference between staying on the shelf another month or being taken off the shelf. 

What about mail order places? They're fine.  They often have good prices and good service.  You won't see us promoting them here, however  ;)

The best thing that people can do with a game they like is word of mouth. It makes a huge impact on smaller publishers/developers (we're both).  If you like the game, recommend it to someone.  That will ultimately do the most good.  The rest will take care of itself.

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Reply #1 Top
Well, I bought the original GalCiv because I liked the box [and what the box said], so there IS some correlation to that in my own experiences.

On a slightly different note, I'm going to try and publish a review of GalCiv2 in the my high school newspaper. ^_^ I hope such a thing might help you guys out -- I have no doubts that GC2 will be awesome. Very rare I can say that about a game.
Reply #2 Top
Thanks for directly answering this question. Hopefully you'll get a lot of good reviews which will help spread the word. And then people will buy the download.
Reply #3 Top
I bought it from EB (rather than buying online) because I have a couple EB gift cards to use up. If I didn't have them, I'd have bought the online version. I'm starting to think I should've done that anyway just so I'd get the game Tuesday instead of whenever the heck FedEx/UPS (EB won't tell who's handling the shipping until after it ships, bah) decides to show up Wednesday.
Reply #4 Top
Well, there was a poll over on mmorpg.com that asked whether we prefer to buy in a mortar and brick store, or if we could download digitally (like we've done here...) and over 50% of the votes were for digital download.

I know myself and my friends prefer digital downloads. And that's what I did with y'all.. I bought direct. Though at what appears to be a higher price than anyone else (Though you don't mention why it's so much more.)

Beyond that.. I can't wait for the game.. err wait? Yeah I can.. and will .. it will be out shortly. But thanks for the heads up on the realities faced by a dev/publisher and what works best for y'all. I was just happy to be able to download the game and get the ability to play it without having ANOTHER box hanging out in my computer room.
Reply #5 Top
Im one of those guys that just doesnt like buying online..and wants the box as well.

5 years from now I may say to myself "I really wanna play some Galciv"..and if I dont have the CD in my little CD tower here.. can i play it? Id have to go to your website and see if you still have it available for download.. if you dont, im gonna be very disappointed that I didnt buy the CD.

and I dont like burning stuff. Until they really ...I cant think of the word...standardize?... basicly.. until they make it so that every CD/DVD burned in every CD/DVD burner works in every CD/DVD rom... I dont trust burning a game for long term use.

Now.. I could buy the actual box from yall over the net.. but then I get the game a week or so later than the people that bought it in the store.. and as much as id like to give yall all the money i am paying for the game, in the end, im doing this for my own enjoyment .....and if I have to go to bed at night knowing that there is a copy of GalCiv2 on the shelves of the local gamestop..and I dont have it... im gonna be a very annoyed gamer.
Reply #6 Top
Now.. I could buy the actual box from yall over the net.. but then I get the game a week or so later than the people that bought it in the store.. and as much as id like to give yall all the money i am paying for the game, in the end, im doing this for my own enjoyment .....and if I have to go to bed at night knowing that there is a copy of GalCiv2 on the shelves of the local gamestop..and I dont have it... im gonna be a very annoyed gamer.


You missed the whole "you can get the game ASAP by download and the box and disc a few days later for only a modest shipping cost" distribution model they have.

Reply #7 Top
I chose the direct way and preordered the download version. I knew you have more bugs if i buy this one.

But... why the hell i payed 45$ for the no-box download version when i could have it for 39$ via amazon shippingfree. Couldn't you make a better price, at least the same like the retailers give?

Reply #8 Top
I just wanted to update my comments about some folks preferring digital downloads to retail stores. Obviously this all has to be taken with a grain of scientific salt.

They have a Poll asking.

How would you rather obtain your online games. (Think MMO's, since this is MMORPG.com's site.)
In a retail box at a store. 46.2%
A digital Download. 53.8%
Votes 11,431 (at the time I looked)
Original Date of Poll: 11/22/2004
Poll Ongoing: Yes (Which obviously can skew results from a snapshot of time aspect.)

What does it mean? Not a whole lot, just thought I would include it.
Reply #9 Top
I went with the option of pre-ordering the CD directly from Stardock. That way I get to download the game right away AND I get the box, manual, tech tree, etc. Stardock really hit a home run with that distribution model as far as I'm concerned.

As for the digital distribution vs. bricks n' mortar, I gotta say I'd much rather download a game than have to go to the store to buy it, especially if I'm really anticipating it. With digital distribution you can always get the game the day it comes out. With standard in-store distribution you're at the mercy of shippers, stock people, etc. Who knows when you'll get it.

Also, I think there is something to be said for impulse buys with digital distribution. Recently I was considering buying SWAT 4. I was reading reviews and whatnot online one night at like 11:00 and I headed over to the official SWAT 4 site. I saw that there was a download option where I could throw down my $19.99 and play the game right away. I jumped at the opportunity. By having a download option right there I didn't have time to talk myself out of the purchase between 11:00 that night and 10:00 a.m. the next day when I could buy it at the store. So I think that a case can be made for digital distribution having some good potential for impulse buys because of the instant gratification it provides.

BTW, my brother plans to buy GalCiv2 at a retail store so hopefully that helps Stardock maintain shelf space.
Reply #10 Top
I went with the option of pre-ordering the CD directly from Stardock. That way I get to download the game right away AND I get the box, manual, tech tree, etc. Stardock really hit a home run with that distribution model as far as I'm concerned.


Agreed.
Best of both worlds.
Reply #11 Top
your right i did miss that option. I actually have known I could have gone that route for a week or two now... but I didnt know about it before I payed for the game at my local gamestop here.
Reply #12 Top
I choose the download only direct from Stardock to maximize the dollars going to Stardock. I hope those that cancelled their pre-orders from retailers to instead pre-order from Stardock don't send the wrong message to the retailers (i.e., GalCiv2 is a bad game and we should stop selling it!).

Brad you keep saying US$39.95 but the price is in fact US$44.95. Link

To date what are the total pre-orders direct from Stardock and from the retailers?

As Brad has said before that the resources directed to GalCiv2 updates will be depended on sales, so spread the word!!! If you like the demo (and you will), buy the game. Unlike other companies Stardock does not place copy-protection (that often causes problems) on their CDs. Show them they choose wisely by buying the game, DO NOT PIRATE!!! US$44.95 is cheap when you consider the many hours of fun you will have playing this game!

I hope GalCiv2 enjoys the same success as Civ4!
Reply #13 Top
Gonna be buying it at Best Buy next wednesday when I get paid.

I'm broke right now.
Reply #14 Top
wait so does that mean that if i preorded it I have to download it, it wont come in the mail within a few days?
Reply #15 Top
Huh? No. Depends if you chose the retail CD version or the download only potion.
Reply #16 Top
Hehe. Happy to help with word of mouth. I posted about the game when I was beta testing, keeping the lads in my clan updated and so forth. Couple of days ago I posted about release day and how the game finially shaped up. A couple of the boys re-ordered at the last minute to get the bonus gear too. Here's what one of em said:

Cool game... definately has that "one more turn" factor. I just wanted to have a quick bash to check it out... now it's three hours later and I'm hooked. Still don't know what the fark I'm doing yet... but it's fun!

The video tutorials are a great idea also.

-- Couldn't agree more. Guess that's another happy customer!
Reply #17 Top
answered alot of my questions but i still have one more

how many game units does a game studio have to sell in order to make a profit and continue making games?

i know that there is alot of factors such as if its a bargin game or a huge mega developement game like AO3 Oblivion and GalCiv2 and wheather those sales are coming from the store or direct download but still im curious to c what the average is
Reply #18 Top
One reason that hasn't been mentionned is the lower cost outside the US
I live in Québec and the prices here are pretty much the same but in canadian dollars, so I can get the game at 39 canadian bucks at my local Futureshop, or I can order from amazon.ca for 37can$ if I want to wait a week or two for delivery.
The guy at EB games told they were gonna sell at 44 can$.

Compared to this, if I order from Stardock, I would have to pay 45 US$ +tax, which would bring it at about 55 can$+tax...
Reply #19 Top
My brother picked up his copy of the original Galactic Civilizations while browsing a gamestore shelves.

I picked up GalCiv II, pretty much on a impulse, when I heard about the custom ship design, but I got hte download version.

I rather suspect one day people will browse download stores for games much the same way the browse brick and mortal stores today. Possibly even more, considering a download store can also house demos and related links, that a typical storefront couldn't really handle.

Harry Voyager
Reply #20 Top
Do you consider it is fair to ask the same price for digital download as for retail? After all you do not get goodies with digital download, and you do not have to pay neither for manufacturing nor for distribution, nor for the shelf place.
Reply #21 Top
Do you consider it is fair to ask the same price for digital download as for retail? After all you do not get goodies with digital download, and you do not have to pay neither for manufacturing nor for distribution, nor for the shelf place.


It isnt an issue of 'FAIR' to you, its an issue of the reality of retail. You cannot (esp if your not one of the mega giants, but even then its still a no-no) you CAN NOT undercut your retail 'partners' (partners being those who extort $$$ from you for the privelege of letting you sell your game in their glorious store)....err umm...but I digress.

At this point in time electronic delivery is just starting to become a real factor and is comming close to replacing the retail channel for the most part. Stardock cannot quite afford to ignore the retail presence, it will still account for a substantial percentage of sales, although I would bet even money they are pleasantly surprised at the growth of online direct sales. Much of the reason retail sales are failing the retail giants have done to themselves. They carry only the TOP 20 or so titles, maybe 40 in a very large store, and for the most part if you go and really look, they typically have 50% (or more) of their PC games shelf space taken up by only a handful of titles. Most of my local stores have 30+ boxes of each and every 'SIMS' game, taking up 20-30 feet of shelf space, and enough EA sports to choke your typical leviathan, while other titles get 1-3 units and one facing (thats 5 inches of shelf space.)

Your typcial small developer like Stardock cannot afford to spend huge sums of money to pay for shelf space, and the retailers, while they may 'carry' the title, do so in such short quantities, that its pretty easy for a few players to clean the shelf off in a matter of hours.

Since retailers are operating this way, many more understanding of the process supporters will gladly pay the full price to Stardock (or whoever) knowing that almost all out $$$ is going to the developer. The retail chains have shown in the past few years an amazing lack of foresight IMHO. Because I can count on them not having the title I want 75% of the time (90% if its within a week of release or more than 4 months after release), I no longer consider retail as my primary chanel to buy software. I make an effort to find things online (and I dont mean Best/com/circuit.com I mean direct).

Retailers deciding not to cater to my needs have made stardock about $100 richer in the past few years (from me anyway). Software is one of the easiest items to sell without an actual physical storefront, thats not to say its easy, but its easier than selling a TV or Can of Beans online.


---I am not affiliated with stardock in any way
Reply #22 Top
I find it hard to believe people really go the "impulse" buy direction. I've been burned by sharp looking boxes so many times I don't even THINK about buying a game before I a)read reviews, and b) visit the developer's website to see how people are griping and how they react to their gripes.

Frankly I don't buy new games that I am looking forward to for the first couple of weeks, anyway, because as you've said on other blogs, there's always unforseen issues. More than once I've had to buy a game and wait a couple of weeks for them to patch it so I can play with my hardware.

I intend to buy GalCiv2, looks good. When I do it will be online, simply because I don't like paying the layabouts at CompUSA or BestBuy for their crappy service. I'd rather my money go directly to those responsible.

I'm surprised the overhead of all those people downloading doesn't eat more than a couple of dollars out of the price of the game. I've never paid the bills for that kind of bandwidth, but it seems like it would be a huge expense to have that many people downloading that much.

On the other hand, game developers these days are offering DEMOS that are hundreds of megs or even a gig, so I guess it isn't as bad as it seems. Hell, Anarchy Online is letting Froobs download 1 gig and play for free in hopes they'll subscribe.